Stock markets continued to reel under pressure on concerns over slowdown in China and its impact on the world economy. The latest wave of panic was triggered by a collapse in oil prices. Brent crude oil futures fell to a fresh 12-year low of $29.46 a barrel. In India, the benchmark Sensex on Friday closed at a 19-month low. The rupee ended at a level earlier seen in September 2013 against the dollar. Gold prices rose as investors moved to safety. Gold prices on Friday moved lower in Mumbai market and closed Rs 25,860 per 10 gm, down Rs 115 from Thursday.
Despite efforts by the government to stem the fall, China stocks ended three per cent lower and slipped into bear territory. European markets were down one per cent, while futures trading indicated soft opening in the US market at the time of close for the Indian market. (BLACK FRIDAY)
The 30-share Sensex fell 318 points, or 1.3 per cent to 24,455.04, lowest level since May 29, 2014. The broad-based Nifty ended at 7,437.8, down 99 points, or 1.31 per cent. The benchmark indices are down nearly seven per cent in 2016. Volatility in China equities and slowdown in its economy have made investors nervous and triggered a flight of capital from riskier assets.
Foreign investors pulled out Rs 1,100 crore from the markets on Friday, while domestic institutions were net buyers at nearly Rs 700 crore, provisional data by exchanges showed. Since the start of the year, foreign institutional investors have pulled out Rs 5,500 crore from the stock market.
"There is a high probability that we will see the Sensex at the 22,000 level in the foreseeable future," said Saurabh Mukherjea, chief executive officer-institutional equities, Ambit Capital, adding, "Weak corporate earnings, economic downturn and foreign outflows will put pressure on the markets."
Meanwhile, the yuan was one of the worst-performing currencies in Asia as panicked traders cut their positions following cues from overseas non-deliverable forwards (NDF) markets. Rupee fell 0.46 per cent to close at 67.60 a dollar on Friday. On Thursday also, rupee had fallen 0.656 per cent.
The Reserve Bank of India (RBI) intervened in the opening trades as well as when rupee neared 67.7 level to stop further losses. According to traders, the central bank has started intervening in the forwards markets too to cool off speculation. However, RBI has no control over the NDF market situated in financial centres like Dubai, Hong Kong, Singapore and London.
"The onshore rupee is firmly following the NDF indicators. Rupee might continue to fall as the NDF is showing some sharp depreciation in rupee in the coming week," said a senior currency dealer with a foreign bank.
The NDF market expects rupee to fall to 67.80-85 a dollar level in a week.
Oil prices have seen their worst-ever start to a calendar year. Brent, which has fallen 20 per cent this year, was trading at $28.72 in spot market. The WTI futures, having lost 25 per cent in 2016, were trading at $29.72.
For the first time perhaps in many years that Brent was quoted in discount to WTI.
Oil fell to a new 12-year low below $30 a barrel in New York, while the discount on global benchmark Brent reached a five-year high as Iran moved closer to restoring exports. International 13-year-old sanctions on Iran may be lifted Monday. Iran happens to be fifth largest producing member in the Organization of the Petroleum Exporting Countries.
Even WTI or West Texas Intermediate futures dropped over five per cent during early trading in New York.
Economic Affairs Secretary Shaktikanta Das posted a series of tweets on Friday's markets: "Finance Ministry and RBI keeping close watch on currency movements. Current account deficit (CAD) expected to be in the range of 1-1.3 per cent in current year. Well under control. Not only rupee, but other comparable currencies too are depreciating against dollar. A positive for India is that CAD is well under control. The government will initiate new reform measures in near future and further open up sectors to attract foreign direct investment."
Biggest Losers of 2016*
India Inc leaders had an inauspicious start to the new year. The net worth of India's top leaders tanked since January 1 this year - thanks to the stock market meltdown. Mukesh Ambani was the lone gainer, as investors are expecting Reliance to gain from its petrochem expansion and launch of its telecom services. Here are the top losers and the sole winner: